© Reuters. Crude Oil Trading Alert: Oil holds near recent highs on hopes of demand recovery
U.S. oil traded around $78.75 a barrel in early Asian trading on Tuesday, January 17; oil prices fell on Monday, but remained near their highest level so far this month, as Asia eased new crown restrictions and raised hopes of demand recovery. The Organization of the Petroleum Exporting Countries (OPEC) will release its monthly report within days, and investors will pay close attention to judging the outlook for global supply and demand.
During the day, we will pay attention to OPEC’s monthly crude oil market report and China’s fourth-quarter GDP.
Bearish factors affecting oil prices
[2023 Davos World Economic Forum Annual Meeting opens, the prospect of economic recession casts a shadow over it]
The prospect of a global recession has cast a pall over the World Economic Forum’s annual meeting in Davos, with participants at the opening session assessing the potential cost to their economies and businesses. Two-thirds of chief private and public sector economists surveyed by the World Economic Forum expect a global recession this year, with about 18 percent saying it is “very likely” a recession in 2022. More than double that of the previous survey conducted in September 2019. Most economists see further tightening in Europe and the U.S. (59% and 55%, respectively), with policymakers risking tightening too much or too little.
According to a survey by PwC, 73% of chief executive officers (CEOs) worldwide expect global economic growth to decline in the next 12 months due to rising inflation, macroeconomic volatility and geopolitical conflicts. CEOs are the most pessimistic since the survey began. The survey also found that 60% of CEOs do not intend to reduce the size of their workforce in the next 12 months, while 80% of CEOs do not intend to reduce employee compensation to retain talent and mitigate staff turnover.
[TheprobabilityoftheFederalReserveraisinginterestratesby25BPinFebruaryis91.2%]
According to CME “Fed Watch”: The probability of the Fed raising interest rates by 25 basis points in February to the range of 4.50%-4.75% is 91.2%, and the probability of raising interest rates by 50 basis points is 8.8%; the probability of raising interest rates by 25 basis points by March The probability of a cumulative rate hike of 50 basis points is 76.9%, and the probability of a cumulative rate hike of 75 basis points is 7.3%.
[Global liquefied natural gas imports will hit a new high in 2022]
The website of Russia Today TV reported on the 15th local time, citing the latest data from Refinitiv, a global financial information service provider, that the total global import of liquefied natural gas in 2022 will hit a new high, and the EU will be the largest buyer. Global LNG imports will total 409 million tonnes in 2022, compared with 379.6 million tonnes the year before, Refinitiv data showed. The record number stems from a surge in demand, especially from the European Union, the report said. In 2022, the EU’s LNG imports will reach 101 million tons, an increase of 58% over 2021, which also makes the EU the world’s largest LNG buyer.
Bullish factors affecting oil prices
[The death toll in the attack on the Dnipro apartment in Ukraine increased to 40, and the UK confirmed that it provided tanks to Ukraine]
The death toll from a Russian missile attack on the Ukrainian city of Dnepr rose to 40 on Monday, with dozens more missing, the deadliest civilian casualties in three months since Moscow fired missiles at cities far from front lines. Ukraine called it a terrorist attack because of the high number of civilian deaths and said it showed why it needed more weapons to repel Russian forces. Russia denies it deliberately targeted civilians. Britain confirmed it would provide Ukraine with 14 Challenger 2 tanks and other equipment, including hundreds of armored vehicles and advanced anti-aircraft missiles, to “accelerate Ukraine’s success”.
[Foreign media survey: the average oil price is expected to be around US$90 per barrel in 2023-2027]
Brent oil prices are expected to remain around $90 a barrel for the next five years, according to the KEMP column’s eighth annual survey of energy market professionals.
The forecasts are mostly $4 to $10 a barrel higher than forecasts in the 2022 survey before the Russian invasion of Ukraine, and about $20 higher than the 2020 survey before the start of the COVID-19 pandemic.
In this year’s survey, oil prices were forecast to average $87 in 2023, down from $99 in 2022, when prices surged following Russia’s invasion of Ukraine and sanctions imposed by the United States and the European Union.
Forecasts for 2023 are concentrated, with half of respondents expecting an average price between $80 and $95, and more than 90% expecting an average price between $70 and $105. From 2024 to 2027, the average price is expected to continue to remain around $90, with a slight decrease in forecasts later in the period.
[NATO will provide Ukraine with more heavy weapons]
Recently, Western countries have continued to increase their arms delivery to Ukraine. On the 15th local time, NATO Secretary-General Jens Stoltenberg said that more heavy weapons would be provided to Ukraine in the near future.
“The recent commitments on heavy combat armament are important and more commitments are expected in the near future,” Stoltenberg said in an interview with German media.
On the 20th of this month, the U.S.-led contact group on Ukraine will hold a meeting to discuss the provision of weapons and equipment to Ukraine again. Since February 2022, the group has held seven meetings, and the United States and its allies have pledged military support to Ukraine after each meeting.
[Western countries’ price limit order against Russia will come into effect soon, and the EU may face a diesel crisis]
On December 5 last year, the Group of Seven, the European Union and Australia imposed price restrictions on Russia’s seaborne crude oil exports. Beginning on February 5 this year, Western countries’ price limit orders for Russian oil products will also come into effect.
In response to sanctions such as oil price caps imposed by Western countries, Russia has taken countermeasures, prohibiting the supply of oil products to countries that have imposed price caps. This also means that Europe will not be able to continue to import Russian diesel at that time, and this may further affect European countries’ industries such as automobiles, ships, construction and machinery manufacturing, making the current economic problems in Europe worse.
According to Bloomberg, citing data from Votexa Consulting, an energy research organization, in 2022, about half of the diesel imports of the EU and the UK will come from Russia. Last year, the EU imported about 220 million barrels of diesel products from Russia. As of December, the EU and the UK brought this down to 40% by importing replacement products from other countries. However, in the face of the upcoming price limit order, this huge import gap is still difficult to be properly resolved.
On the whole, although concerns about the economic outlook limit the rise in oil prices, the relaxation of new crown restrictions has boosted demand recovery, coupled with the help of the geopolitical situation, oil prices will maintain a volatile upward view, and pay attention to the OPEC monthly report and the speeches of Fed officials within the day.
At 8:22 Beijing time, U.S. crude oil was trading at $78.75 a barrel.
